Utilities Watch

Published: June 24, 2005

Though coal-fired plants already provide nearly half of our nation’s electricity, and that share is expected to hold steady over the next 20 years, the fuel is having a renaissance of sorts in the electric generation industry.
The price of coal, unlike natural gas or oil, has been relatively stable for a number of years. UtiliPoint, an energy industry think tank, reports that more than 100 new coal plants are being planned across the country, and many utilities and merchant plants are investing in new technologies to “scrub” the emissions from coal-fired plants.
According to the Charleston Gazette, the average American is expected to use as much as 3 percent more electricity each year over the next two decades — and coal-fired plants could help fill the gap. The federal government estimates that the nation’s electrical consumption is expected to nearly double in the next two decades, from about 3,480 billion kilowatt-hours in 2003 to 5,220 billion kilowatt-hours in 2025.
About 1.1 billion tons of coal was mined last year, slightly below the 2001 record of about 1.3 billion tons; about 1 billion tons were used. Meeting the growing demand for coal would, however, likely require a multimillion-dollar investment in employees and equipment.
In an article published in the Portsmouth Herald Martin Murray, spokesman for Public Service of New Hampshire, said that, thanks to stable prices, coal is making a comeback, in part because it’s cheaper to burn and coal plants are less expensive to build.
“People are generally surprised and unaware,” Murray told the Herald, that coal provides so much of the energy to power their electric needs.
Last year, PSNH used 1.5 million tons of coal at its power plants in Bow and Newington. More than half of the coal came from South America and the rest, Murray said, came from the coal-mining centers of Appalachia.
Cleaner-burning coal has been one of the most significant technological advances of the past couple of decades. The old plants are being replaced by newer plants or are being refitted with the latest scrubbing technology, which acts “like the catalytic converter” in your car, said Murray.
The South American coal PSNH uses has a much lower sulfur content, and PSNH mixes it with the Appalachian coal (which has a higher sulfur content) to bring down sulfur dioxide emissions.
According to Murray, this practice has helped PSNH reduce sulfur dioxide emissions by 40 percent, compared to 1990 levels.
Industry challenges
Coal gasification holds the promise of using coal on a much broader scale and reducing greenhouse gases significantly.
Rather than burning coal directly, gasification breaks down coal — or virtually any carbon-based feedstock — into its basic chemical constituents. In a modern gasifier, coal is typically exposed to hot steam and carefully controlled amounts of air or oxygen under high temperatures and pressures. Under these conditions, carbon molecules in coal break apart, setting into motion chemical reactions that typically produce a mixture of carbon monoxide, hydrogen and other gaseous compounds.
The environmental benefits stem from the capability to cleanse as much as 99 percent of the pollutant-forming impurities from coal-derived gases. Sulfur in coal, for example, emerges as hydrogen sulfide and can be captured by processes used today in the chemical industry.
Although the Herald cited a report in The New York Times that reported that almost all the new coal plants currently being planned will not have gasification technology because it is perceived to be a cost-risky investment, Columbus, Ohio-based American Electric Power, one of the largest electric utilities in the United States, apparently believes otherwise.
AEP recently announced its plan to build up to 1,200 megawatts of Integrated Gasification Combined Cycle (IGCC) clean-coal technology, the first commercial-scale use of the technology for power generation and the largest IGCC plan announced to date.
Michael G. Morris, AEP’s chairman, president and chief executive officer — and former CEO of Northeast Utilities — said, “We’ve worked for more than a decade with technology providers to push clean-coal generation from theory to commercial viability and are extremely pleased to be the first to bring the technology into mainstream use.”
UtiliPoint reports that the coal industry is beginning to see some of the dynamics commonplace in other fossil fuel markets, such as consolidating ownership, more volatile commodity prices and increased competition from overseas. With natural gas prices at record highs and no relief in sight, utilities are not only looking at new coal power plants but also at upgrading their existing fleet.
At a May 2005 meeting with industry analysts, Consol Energy projected that over 46,000 MW of existing coal plants east of the Mississippi will be adding or retrofitting scrubbers for reducing sulfur dioxide (SO2) emissions. The investment required for such plant modifications runs in a range of $450 to $600 per ton of sulfur dioxide removed, according to Consol. That can amount to billions of dollars in capital needs.
Additionally, some utilities are deploying a strategy of scrubbing certain of their plants and then applying any excess SO2 credits to their other power plants without such pollution controls, or selling the credits on the open market.
Doug Patch, former chairman of the New Hampshire Public Utilities Commission, is with the Concord law firm of Orr and Reno.

This article appears in the June 24 2005 issue of New Hampshire Business Review